Home | List of Articles | Submit an Article | Contact Us

When Are You Entitled to Stock and Cash Dividends

Have you ever bought a stock only to find out later that you were not entitled to the next cash or stock dividend paid by the company? To determine whether you should get cash and most stock dividends, you need to look at two important dates. They are the "record date" or "date of record" and the "ex-dividend date" or "ex-date."

When a company declares a dividend, it sets a record date when you must be on the company's books as a shareholder to receive the dividend. Companies also use this date to determine who is sent proxy statements, financial reports, and other information.

Once the company sets the record date, the stock exchanges or the National Association of Securities Dealers, Inc. fix the ex-dividend date. The ex-dividend date is normally set for stocks two business days before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.

Here is an example:

Declaration Date	Ex-Dividend Date    Record Date	   Payable Date	7/27/03	                8/6/03	                8/10/03	        9/10/03

On July 27, 2003, Company XYZ declares a dividend payable on September 10, 2003 to its shareholders.

XYZ also announces that shareholders of record on the company's books on or before August 10, 2003 are entitled to the dividend. The stock would then go ex-dividend two business days before the record date.

In this example, the record date falls on a Tuesday. Excluding weekends and holidays, the ex-dividend is set two business days before the record date or the opening of the market – in this case on the preceding Friday. This means anyone who bought the stock on Friday or after would not get the dividend. At the same time, those who purchase before the ex-dividend date receive the dividend.

With a significant dividend, the price of a stock may move up by the dollar amount of the dividend as the ex-dividend date approaches and then fall by that amount after the ex-dividend date. A stock that has gone ex-dividend is marked with an "x" in newspapers on that day.

Sometimes a company pays a dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company or in a subsidiary being spun off. The procedures for stock dividends may be different from cash dividends. The ex-dividend date is set the first business day after the stock dividend is paid (and is also after the record date).

If you sell your stock before the ex-dividend date, you also are selling away your right to the stock dividend. Your sale includes an obligation to deliver any shares acquired as a result of the dividend to the buyer of your shares, since the seller will receive an I.O.U. or "due bill" from his or her broker for the additional shares. Thus, it is important to remember that the day you can sell your shares without being obligated to deliver the additional shares is not the first business day after the record date, but usually is the first business day after the stock dividend is paid.

For a FREE report on HOW TO TRADE FAST, enter your email address at:

http://lb.bcentral.com/ex/manage/subscriberprefs?customerid=12826

Related Articles:

Is Your Mutual Fund Or Stock Trying To Tell You Something? - As I mentioned in my last message, if the support line of your mutual fund or your stock is broken, beware! This is a very clear signal you should be hedging your position, and perhaps consider selling a portion (or maybe even the entire) position. Breaking the support line is the ultimate sign that supply is now ...

Stock Splits Can Be Very Profitable - Years ago (pre bubble days) a stock split was still something special. Although the idea of giving someone twice as much stock for half the price is statistically insignificant, the fact is an entire psychology sprung up around them. In fact, a book called the the Anatomy of a stocks split was written, and many si ...

Why Cash is Your Best Asset With Penny Stocks - When you start your Penny stocks trading career you first need to decide how much you are willing to invest. You need to remember that this is not a “sure-fire” income opportunity and that it is possible that you may lose everything, so be sure to not to invest more than you can afford to lose. That said whe ...

Could an Oil Slick Trip Up Stock Investors in 2006? - When you start your Penny stocks trading career you first need to decide how much you are willing to invest. You need to remember that this is not a “sure-fire” income opportunity and that it is possible that you may lose everything, so be sure to not to invest more than you can afford to lose. That said whe ...

Stock Market Research - There is a very large amount of stock market research conducted by stock market analysts, traders and other participants in the Australian stock market. All of the major stock broking firms conduct research as a major part of their operations and provide advice to their clients. In recent times, there ...

Buy Your Company's Stock ? - For some people, this subject conjures images of the devils in management at Enron, WorldCom and other bankrupt former high flyers. Mesmerized by the sweet profit projections coming from their corporate chieftains, all too many employees of these firms put all of their retirement nest egg in company stock. When th ...

Conversations in Management: Admiral James B. Stockdale - "The one thing I came to realize was that if you don’t lose your integrity you can’t be had and you can’t be hurt." -Admiral James B. Stockdale. This is a pretty good insight, but Admiral Stockdale wasn’t just talking about the vagaries of every day life. He was talki ...

Mutual Fund Versus Stocks - "The one thing I came to realize was that if you don’t lose your integrity you can’t be had and you can’t be hurt." -Admiral James B. Stockdale. This is a pretty good insight, but Admiral Stockdale wasn’t just talking about the vagaries of every day life. He was talki ...

For a Complete list of Articles with summaries Click Here